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The fundamental distinction between a duplex and a triplex is the number of units within the structure: a duplex has two units, while a triplex has three. Even with this knowledge, deciding which one to choose can be tough. Here is all you need to know about triplex apartment buildings so you can decide if they're right for you.

A triplex is created by modifying the flats and constructing stairs to connect the three stories. A one-bedroom unit configured as a triplex is a less typical configuration. The unit's layout only covers two stories of the structure in this situation. There is, however, a middle floor that connects the two stories. The unit's layout is such that every "floor" is not in line, with a half-staircase between floors that you can use to get up and down. This arrangement is quite uncommon, and it's most likely to be seen in structures where each story is higher than the norm.

Triplex apartments are available in a variety of styles, with the most desired being those in which the floor area of all the units is almost identical. Families choose triplex flats because of their spacious interiors, which are typically house-like.

What Is a Triplex?

What is a triplex? A triplex apartment is a building that combines three separate residential units into one structure, with the various apartments sharing one or two common walls. Every unit in a triplex has its own bathroom(s), kitchen, living room, exterior doors, and address.

A triplex is a three-unit residential structure with a single owner, akin to a duplex or fourplex.

While a triplex is made up of three separate residential units incorporated into one structure, the units usually share one or two common walls. Each habitation area in a triplex is self-contained.

Some triplexes are built specifically as triplexes, while others may have started out as a big single-family residence that was later partitioned into three independent dwellings.

A triplex is frequently sold as a single structure, and the owner either rents out all three flats or lives in one and rents the others. Furthermore, a  triplex owner can sometimes live in one unit while family members dwell in the others. A triplex apartment building, on the other hand, is usually bought as an investment (for example a rental property), to earn money from rent.

Understanding the Basics of a Triplex House

Three units are connected by a private inner stairway in a triplex residence. They are particularly well-known with families because of their size and three-floor layout, which facilitates the separation of private and public portions of the house.

As previously stated, triplex flats must be linked from within the apartment instead of existing as three independent units on various floors, with accessibility to one floor from the other via either a public stairway or an elevator.

The owners of several triplex flats in condominium or co-op buildings bought the units above or below their home and renovated them to create connected floors. To do so, you normally need approval from the board of directors of your co-op or condo, which isn't always straightforward.

Furthermore, the stairways of triplex apartments are available in a variety of shapes and widths, but unless the apartment is extremely large, many of them are built to take up as little room as possible. Spiral stairs are one of the most common space-saving designs, along with switch-back staircases and the ever-impressive floating forms.

What Are the Advantages and Disadvantages of Owning a Triplex Apartment?

There are a few major benefits and drawbacks to owning a triplex, particularly for landlords who want to reside in one of the three properties.

Benefits

  • When repairs are needed, the landlord is close by.
  • The landlord can deduct some maintenance expenditures, depreciation, and repairs for the rental units, which can save him/her money on taxes.
  • With all three units sharing the same yard, roof, and other shared features, repairs and upkeep can be more efficient.
  • The utility bills for the rental units can be written off if the owner pays the utilities.
  • The owner can then leave and have three properties that generate income.

Drawbacks

  • A triplex is usually more costly than a duplex or a single-family house.
  • A triplex apartment can be more challenging to sell because there are likely to be multiple tenants with varying lease expiration dates.
  • Living so close to tenants might be stressful for landlords. If there are any issues, the landlord is still one of the tenants' neighbors.

Triplexes are also less frequent than duplexes and fourplexes, thus if a buyer is seeking a triplex in a given market, they may have a harder time locating one.

Investors who are just getting started or who are only experienced with single-family homes may be interested in investing in a duplex, triplex, or fourplex. A multifamily home is defined as a structure having two, three, or four units.

What to Expect from a Triplex Building

Here is all you need to know about renting or purchasing a triplex apartment:

  • Amenities - A triplex apartment almost always has desirable features including in-unit laundry, patios, driveways, porches, and even garages in some circumstances. These are amenities you'd find in a home rather than an apartment complex.
  • Privacy - One of the most appealing features of triplex apartments is the seclusion they provide to their residents. When you reside in a triplex unit, you do not have as many neighbors as you would if you lived in an apartment complex.
  • Exterior space - Because a triplex apartment is made up of only three units in one building, the outdoor space is going to be shared by only three households. This is a big improvement over sharing a little yard with a bunch of other people in an apartment complex.
  • Spacious - Triplex apartments are among the largest available on the market. They are larger than ordinary rental units, which accounts for their popularity among families.
  • An excellent place to start investing in multifamily properties — If you want to transition from a single-family property to a multifamily property, you might choose to start with triplex units. With regards to managing tenants and screening in a triplex unit, you have a simpler time than if you make a direct transfer to investing in an apartment building.
  • You may live in one of the apartments and rent out the others - You can live in one of the triplex apartment's units and rent out the others. This way, you can continue to earn money from collecting rent while still having a place to stay in your home.
  • Rent income - You can create a significant rental income and pay off the mortgage quicker if you rent out all the flats or even just two of the units.
  • They are more costly to buy - Due to the additional unit, triplex apartments are normally more expensive to buy than duplex apartments.
  • If you live in one of the units, you may have disagreements – Living in the same house as your tenants might be difficult. This is especially true if neither party has any guidelines on how they should act.
  • Sharing shared areas and amenities like driveways with your neighbors — Living in a triplex involves learning to share common areas and amenities like driveways with your neighbors. Furthermore, you have to share a common wall with your neighbor, which may cause noise problems.
  • Aren't commonly accessible – Larger apartment kinds, such as triplexes, are less common than smaller apartment types, such as one-bedroom and studio flats. This is particularly important if you plan to rent or buy a triplex in a city.
  • Maintenance and repair costs are greater – As the landlord of a triplex, you are accountable for all of the units' usual wear and tear. This eats away at your funds and takes up a lot of your time, particularly if you do your own maintenance and repairs.

Living in a triplex apartment gives you access to benefits that you wouldn't get in a typical apartment. Investing in a triplex rather than a smaller multi-unit like a duplex has the same benefits. However, there are certain disadvantages to consider, such as the high cost of renting or investing in these unit types and their unavailability. Overall, consider both the positive and negative aspects of triplex apartments before making a decision.

What Are the Different Triplex Financing Options? Commercial vs. Residential Loans

Most lenders think about a building with more than four apartments to be commercial real estate, necessitating the use of a commercial real estate loan, which has quite different terms than a residential loan.

A triplex, like a duplex or a fourplex, is eligible for a residential mortgage loan because it contains less than five units. Commercial loans are nearly always used to finance structures with five or more units.

A commercial loan often has a shorter amortization and is based more largely on the building's net operating income, whereas a residential loan is based more strongly on the individual's creditworthiness.

When purchasing multi-unit properties, a real estate investor can obtain either a commercial or residential loan; however, it is often preferable to obtain a residential loan over a commercial loan. In comparison to a business loan, a home loan often offers a lower interest rate and a longer loan period.

Furthermore, if an investor does not want a long-term loan and intends to pay off their residential loan beforehand, they may finance the transaction with a 30-year loan and pay it off whenever they want. This gives you additional options.

FHA Financing for Purchasing a Triplex or Other Property

It is a prevalent misperception that the FHA only lends to single-family homes that are used as primary residences. The FHA finances buildings with up to four units if the buyer intends to live in one of them, which is not well known. Furthermore, the net rental income is also taken into account by the FHA throughout the qualification procedure. If you have a low income, the structure's rent may be able to help you qualify.

FHA requires as little as five percent down on multifamily purchases, with loan limitations of $403,000 for duplexes, $487,000 for triplex apartment buildings, and $605,500 for fourplexes in most parts of the country.

Commercial Lending vs. Residential Lending

Traditional residential loans can be used by homebuyers and investors to purchase a duplex, triplex, or fourplex. If you want to develop a 12-unit apartment building, you have to know how to secure financing for an apartment. Apartment loans are business loans that differ from residential mortgages in that they place a greater focus on the estate's financial performance and potential than on the purchaser's qualifications.

Larger multifamily properties with five or more units are often financed through commercial real estate loans. They typically have higher interest rates and costs, as well as a shorter loan duration of 20 years or less, resulting in a higher monthly mortgage payment.

Commercial loans can be utilized for any size building, but because of their lower cost and shorter-term, they are best suited for complexes with five or more units.

Buying Duplex, Triplex, or Fourplex Properties

When it comes to both investors and house buyers, a "-plex" property can be a good investment. It makes sense to keep it as an owner-occupied property so you can earn some money–and possibly live without a mortgage–while also learning how to invest in multi-unit homes. Investors consider "-plex" properties as a method to diversify their income streams while also consolidating their upkeep costs.

When buying a "-plex," you should analyze the building's condition, location, and engage in a professional inspection, just as you would when buying other forms of residential real estate. These are crucial when it comes to negotiating a reasonable purchasing price.

You must take a few extra steps because this property has the potential to generate money for you. It makes no difference whether you intend to live in one of the flats or rent them all. Treat the property as if it were a company.

  • Examine the property's data, such as gross operating income, maintenance costs, vacancy rates, and anything else that could have an impact on your bottom line. Your operating income is lowered if you have a high turnover rate. Is the property's upkeep cost considerable, lowering the net operating income?
  • It is crucial to consider the location. Is the property located in a desirable neighborhood? This boosts your opportunity of keeping the building occupied and obtaining reasonable rents. What are the rents for other duplexes, triplexes, or fourplexes in the neighborhood where your prospective property is located?

A real estate specialist with experience in modest multifamily properties can assist you in conducting market research and determining the property's worth.

If you are wondering whether to buy a duplex or a fourplex, there are benefits and drawbacks to both options. It all comes down to sales, income, and expenses for the most part. The more units you have, the higher your expenses are going to be, but you are also going to have more income to cover them.

It is worth studying tenant management and how rental properties are operated before purchasing a duplex, triplex, or fourplex. Whether you decide to live in one of the units or not, there's a good probability you are going to be renting out at least one of them. Learn about the Fair Housing Act and other local restrictions that affect you if this is your first time being a property investor or landlord.

As a landlord, you are in charge of screening tenants, writing leases, and negotiating to keep the property in livable shape, collecting rent, and other responsibilities. Be at ease with the prospect of evicting tenants. Make sure you have a strategy in place before you buy a multiplex.

Meet with lenders once you've decided to buy a duplex, triplex, or fourplex unless you plan to pay cash. Find a financing option that is appropriate for your situation. To find out how much you can afford, get pre-qualified.

It can be difficult to locate these properties. They can be listed as residential real estate or as multifamily properties on commercial real estate websites. An experienced real estate agent knows where to look for these properties and may use their connections to identify owners who are willing to sell their units.

Is a Duplex, Triplex, and Fourplex Commercial Rental Property?

The commercial real estate market is divided into submarkets by real estate professionals: retail, office, medical, hotel, industrial, and multifamily.

Multifamily real estate includes duplexes, triplexes, and quadplexes. It is a single structure that houses many families. Owning a "-plex" is one of the most attainable forms of real estate for new multifamily real estate investors. The reason for this is due to a lack of funding. When it comes to the purchase of these types of properties, a residential real estate loan is available. A commercial real estate loan is required for properties with five or more sections.

Taxes on Duplexes, Triplexes, or Fourplexes

Property taxes are never fun, but they don't have to be difficult to understand. A "-plex" estate's taxes are inherently more complicated. Owner-occupied properties, such as single-family homes or condominiums, benefit from homeowner tax discounts. If you rent out the extra units, however, you may be eligible for further deductions. Potential complicates everything. Because every situation is unique, consulting a tax professional or CPA is your best bet. Furthermore, for starters, consult the IRS's online reference on the requirements for owner-occupied and rental properties.

Why Should You Buy a Duplex, Triplex, or Fourplex?

The majority of people considering purchasing a duplex, triplex, or fourplex are looking for a good investment. The following are some examples of common ownership scenarios:

  • You reside in one unit and rent the other as the owner (s). The apartment may have a larger monthly payment than a comparable sized single-family home, based on the down payment. The rental income compensates for this. You create equity in the property faster if you have a bigger mortgage payment. In some situations, you may be able to live debt-free since your tenants' rental payments cover the cost of the mortgage.
  • You, as the proprietor, dwell in one of the units. The other apartment houses can accommodate your extended relatives (s). This living situation allows children to care for their aging parents or provides space and freedom to a couple's younger adult offspring. Another situation is that extended families buy the duplex as a strategy to accumulate equity and become homeowners.
  • As an investor, you purchase the building and rent out all of the units. The “-plex" is entirely a financial investment. The maintenance costs are reduced as a result of the combined properties; for example, replacing the roof of one triplex is substantially less expensive than re-roofing three single-family homes.

Takeaways on a Triplex Apartment Building

A triplex is identical to a duplex, except that it has three units (or three floors) in one building. The units do not have to be next to each other; the building can have three floors, each with one unit. Top-to-bottom or back-to-back configurations are also available in some triplexes. A triplex apartment has a common structure irrespective of how the units are arranged. They were either purchased as a single-family home that was later divided into three units, or they were specifically purchased and/or built for that reason.

Triplexes are less prevalent than duplexes and fourplexes, although they have similar benefits and drawbacks. Generally speaking, triplexes have a higher potential for cash flow than duplexes, particularly if the owner opts to rent out all three units rather than house hack one unit.

Are you ready to invest in a triplex with three floors or units? There are endless options and you can find the ideal one for you, and your family with the assistance of a property management company!

David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his two children, he's writing articles here!